A digital revolution for public radio fundraising

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Marketing consultant John Sutton has been forecasting what public radio will look like in 2018, and his predictions, published on his blog RadioSutton since February, have been provocative. Sutton is among the pubradio analysts who believe that federal funding “will be sharply reduced or gone in five years.” He also believes that digital listening will fragment the audience enough that eventually NPR will have to raise money directly from listeners or the current public radio economic model will collapse. Below, he lays out a proposal for overhauling public radio fundraising and how it makes both dollars and sense.

Imagine a future in which listeners donate 26 percent more money to public radio at half the cost. Imagine that NPR has nearly $60 million more to invest annually in world-class journalism and development of new programs.

John Sutton

John Sutton

Is this imaginative exercise making you uncomfortable? Breathe deep and exhale. In this future, local stations don’t pay NPR for the programs they broadcast. Instead, they receive six-figure grants from NPR, averaging $220,000 annually, for local news and digital initiatives tailored to the needs and interests of their audiences.

This could be public radio’s future. It’s made possible not only by the growth of digital listening, but also because digital has opened up new fundraising opportunities that could significantly reduce the cost of raising money, shrink the number of pledge days airing on local stations and allow stations to further focus on major giving.

Far-fetched, you say? The numbers show that it’s all possible.

According to NPR there were 37.6 million weekly public radio listeners in Fall 2011.  That’s all of public radio, not just NPR stations.

Meanwhile, CPB reports that 2.7 million people donated $360 million to public radio in FY 2011.

Let’s do some cocktail-napkin math.

360 mil/37.6 mil = $9.57 donations per weekly cume listener in FY 2011.
Public radio earns an average of $9.57 in donations per weekly listener.
The weekly cume for NPR programs in Fall 2011 was 22.5 million listeners.
22.5 mil x $9.57 = $215 mil
This is the financial value of the weekly NPR radio audience.

If NPR could raise money directly from listeners using NPR.org, podcasts, email, social media and its database, it could raise an amount in the neighborhood of $215 million.

These numbers are conservative projections of NPR’s fundraising potential, for three reasons. First, they omit people who listen exclusively to NPR programs through NPR.org or satellite radio. Second, they use national averages for all public radio stations; research shows that NPR News listeners donate more money annually than the average public radio listener. Third, these numbers are based on the average fundraising program. If NPR were to raise money directly from listeners, it would presumably run a better-than-average fundraising operation.

What would happen if NPR raised money directly from listeners? There are lots of possibilities. Here’s one very likely cocktail-napkin scenario:

NPR raises $215 million from listeners but, because of NPR’s direct fundraising, contributions to stations decline by a third of the money they raised in 2011.

$360 mil – $120 mil (that is, one third of $360 mil) = $240 mil (rounded)

This is the amount stations would receive from listeners if NPR also solicits direct contributions.

$215 mil (NPR) + $240 mil (stations) = $455 million

This is the total amount NPR and stations could raise in direct fundraising.

So, what happens to total system revenues from direct listener fundraising?

$455 mil – $360 mil = $95 mil: 26% growth

That’s right, NPR’s direct fundraising boosts individual contributions to public radio by 26 percent.

Even better, given the reach of NPR’s programming, audience database and social-media activities, NPR should be able to raise this money for around 10 cents on the dollar, or $21.5 million per year. And that’s without on-air pledge drives.

Ten cents on the dollar is much less than stations and other nonprofits spend on fundraising but in line with what the Wikimedia Foundation spends on its web-based fundraising.

Given the differences between the average annual gifts of public radio listeners (around $130) and Wikimedia Foundation donors ($27), the cost-per-dollar to NPR could be even less.

What would happen next would change the public radio economy in many positive ways.

NPR nets $193.5 million after the cost of fundraising.

$215 mil – $21.5 mil = $193.5 mil

NPR gives its programming to stations for free, saving stations about $75 million.

NPR recoups that $75 million from the money it raises directly from listeners and splits the balance with stations.

$193.5 mil – $75 mil= $118.5 mil/2 = $59.5 mil

NPR keeps $59.5 mil and creates a $59.5 million grant pool for local station news, programming and digital initiatives.

$59.5 mil/270 stations = $220,000 average payout to each NPR Member station

When you take into account that NPR dues and fees averaged about $277,000 per station in 2011, this new arrangement would generate nearly $500,000 in new revenues per station.

$277,000 + $220,000 = $497,000
NPR dues savings per station + average payout = $500,000 (rounded)

Beyond the net cash to stations, this proposal offers many benefits to the public radio system. Stations wouldn’t have to conduct as many days of on-air fundraising — that’s better public service. Plus, the cost of fundraising would go down — that’s good stewardship.

There’s more: NPR will be back in the business of serving its member stations rather than competing with them. NPR will depend on station audiences for more of its revenues, giving it incentives to grow radio listening, which would benefit NPR and member stations. NPR also gains significant new resources and latitude to grow its national and global audiences.

Stations will have more money to develop local content that creates stronger communities. That helps attract more philanthropic dollars from major donors and foundations, further solidifying the station as a valued community institution.

Can’t happen, you say? Consider that Apple changed the entire economy of the record industry working as an outside agent. Surely NPR could change the entire economy of public radio as the most powerful organization in the industry.

The timing is good. Public radio is constantly being warned that the transition to the digital space is fraught with disruption and danger. Yet the most significant part of digital disruption isn’t going to happen in the car or on a mobile device. It’s going to happen in the public radio economy. It’s going to happen in listeners’ wallets. The only question is whether it happens by design and in a way that benefits NPR and stations alike.

The answer is “yes.” All it takes is imagining a future where public radio jumps ahead of the disruption and starts a revolution of its own. Change how public radio raises money and how money changes hands behind the scenes, and you change the future of public radio for good.  n

Maryland-based consultant John Sutton provides research, marketing and management consulting services to public radio stations and other organizations. During 10 years at NPR, Sutton took on various roles in audience research, on-air fundraising and strategic planning.  After establishing John Sutton & Associates in the late 1990s, he became a major instigator in the push to reduce the number of public radio pledge days. His series of blog posts forecasting what public radio will look like in five years were first published on Radio Sutton.

9 thoughts on “A digital revolution for public radio fundraising

  1. It’s amazing how rosy a financial picture can look when the numbers are based upon unsupported assumptions. How is the author’s “very likely cocktail-napkin scenario” in which NPR raises the same amount as the entirety of the system while stations incur only a 33% drop any more plausible than my assertion that public radio revenue would rise by 17% if we could harness the financial clout of Bigfoot?

    Given that stations raised much of that $215 million with pledge drives, by what magic does NPR raise it without them? And how can one assume that a centralized fundraising organization is necessarily going to operate “better than average?” Depends upon who is running it and the specific choices that they make. It sounds as if the assertion is that because NPR runs a world-class news operation that other activities in which it engages would be similarly effective.

  2. Maybe I’m missing something amid the author’s litany of assumptions, but if NPR is raising money online what would be the incentive, “to grow radio listening?”

    Member stations currently control NPR’s purse strings. They built that organization through the blood, sweat, and tears of volunteers and underpaid staff. Why would they then turn around and give it away?

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